YouTube Charging? Site's Chief Mulls Paid Subscription Models

06/14/2012 05:46 pm ET
|
Updated
Aug 15, 2012

Alexei Oreskovic and Yinka Adegoke

By Alexei Oreskovic and Yinka Adegoke

NEW YORK (Reuters) - YouTube's boss said that cable television channels with small audiences will in the future migrate to the Web and become available on a stand-alone basis, potentially making a home for themselves on the No.1 video website.

The cable channels could provide more professionally produced content for YouTube as it weighs selling subscriptions for consumers to access some of its video offerings.

As YouTube, owned by Google Inc, ponders selling subscriptions, it has "seen demand from the kind of networks that have smaller audiences on cable," and which get very little or no affiliate fees from cable distributors, Kamangar said at the Reuters Media and Technology Summit on Thursday.

"I see those kinds of networks becoming available in the future on the Web and I see those becoming available in an a la carte basis," he said.

Cable channels are traditionally sold in fixed bundles of up to 100 channels -- an arrangement which has triggered grumbles from consumer advocates as the price of even the cheapest package outpaces inflation.

New entrants like Google, Intel Corp and Microsoft Corp among others have tried to convince major content owners to allow them to sell smaller bundles of TV networks to consumers over the Internet. But the network owners have refused to break the cable bundles for fear of undermining their lucrative $100 billion relationship with their traditional distributors.

Kamangar told Reuters that Google had thought long and hard about bringing traditional programming to YouTube but had found it too expensive.

Small to midsize networks with fewer viewers sometimes struggle in the cable space as they have less leverage to raise their prices with the operators.

Kamangar's comments come as Department of Justice has launched an inquiry into whether cable TV distributors are hampering development of the fledgling online video sector.

One of the key issues Justice is looking at is how the cable industry insists on only selling bundles of networks to cable and satellite partners.

Large media companies, meanwhile, are increasingly looking at ways to offer their own specialized programs on YouTube, seeking potential acquisitions in some of the specialized video "channels" currently available on YouTube.

"The top network executives are really taking notice. They're asking questions about who is doing well, about who is building a professional management team. And I think eyes are very much on this space now," said Kamangar.

Discovery Communications' acquisition of Web video provider Revision3 last month is the first of more such deals that Kamangar predicted will happen in the coming year.

YouTube, the world's No.1 video website, which streams more than 4 billion videos every day, is moving to add professional-grade video programs to the vast archive of amateur, home-shot videos that made the site popular.

In October YouTube announced that it had struck 100 original video programming deals with media partners including pop star Madonna and hip-hop mogul Jay-Z. Thomson Reuters is among YouTube's partners.

Roughly half the channels have launched so far, said Kamangar, and the top ten channels are each getting about one million views a week.

Kamangar said the channels are also drawing interest from large brand advertisers such as Toyota and Unilever that have spent money to advertise on the channels.

YouTube is also considering making some of the original video programs featured on recently launched YouTube "channels" available for a fee, which would be shared by the content provider and YouTube.

"There's a lot of demand from some of our top video game networks," Kamangar said. "They have such a big audiences that they can start to segment their audiences into those that are willing to pay a higher amount" for things like new gaming tricks.

He also cited sports such as the Ultimate Fighting Championship as being ideally suited for online subscriptions.

YouTube currently makes money by selling advertising including pre-roll video ads and sponsorships of certain parts of the site, though Google does not break out financial results for YouTube.